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Home Mortgage
For people interested in buying a home, the market is rich with both homes and mortgage rates. If you are thinking about buying a home, your best bet is to have from 10% to 20% of the home’s value as the down payment and closing costs. Now keep in mind that many programs exist that can get you into a home for as little as 3% to 5%. However, these programs do come with special requirements and qualifications.

As you begin your search for a home, the main consideration is the annual percentage rate, also called APR. This figure consists of the cost of credit, which would be your interest, points, and the mortgage insurance. Today’s rates are very affordable, averaging around 7% whereas in the early 1980s, the rate was as high as 18%! This means buying a home today is a better buy and you can generally get much more home for the money.

Although there are always varying factors, generally, with good credit, you can qualify for a mortgage loan that would be equal to two or two and one-half times the amount of household income. That means if you make $50,000, you would be able to afford a home ranging from $100,000 to $150,000. However, lenders will look at more than just your income. For instance, they will also consider your housing expenses, which would include the mortgage, taxes, insurance, and any assessments to ensure they do not exceed 28% of your monthly gross income. Additionally, on top of the housing costs that total the 28%, any long-term debts would be added. The two combined should not exceed 36% of your monthly gross income.

Another factor in buying a home is your credit and employment history. These are very important to the lender in that they show stability and reliability. The best thing you can do is about one year prior to buying a home, have your credit report run by the three main credit reporting agencies. Carefully go over each item and when you find discrepancies. This would include bills that have been paid off but not removed, payments showing late when you have proof they were paid on time, or inquiries for new credit that you never made. Highlight them and send the changes back to the agency. After a couple of months, you can then ask for another set of reports, which will be free. Make sure all of the changes have been made and from that day forward, never be late on a bill, pay more than the minimum amount due, and do not buy anything other than what you have to have.

Your employment history is just as important. If you tend to jump around from one job to another, this will make most lenders very nervous. Keep in mind that if you work in the same type of job but take new jobs to move up the corporate ladder, this is different. For instance, if you are a project manager in real estate, although you might have had six jobs in the past 10 years, each time you were promoted and now hold a good-paying job. In this case, this would not be viewed as being unstable.

The best way to shop for a mortgage is to consider all your options. You can work with a broker or real estate agent that can work with you in coming up with the best package for your situation. Additionally, check out your local newspaper in the business or real estate section, check on the internet, and talk to a number of different lenders. Always compare the various mortgages prior to applying for a loan. The reason is that many lenders will charge you a fee for the application process, which could add up quickly if you start sending in a bunch of applications. Although some lenders will refund the fee if you are not approved for your mortgage loan, make sure first.

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